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Millennials Dumping Stocks: Why Now’s The Time To Do Just The Opposite

By Mike Zaccardi, CFA, CMTMarket OverviewSep 25, 2022 02:26AM ET
www.investing.com/analysis/millennials-dumping-stocks-why-nows-the-time-to-do-just-the-opposite-200630257
Millennials Dumping Stocks: Why Now’s The Time To Do Just The Opposite
By Mike Zaccardi, CFA, CMT   |  Sep 25, 2022 02:26AM ET
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  • An August poll showed that nearly half of millennials surveyed claimed to have sold investments over the past year
  • Other age groups largely kept with their portfolio plan
  • With a big stock market drop in 2022, it’s likely an ideal time to beef up investment contributions

Investing strategy is most important when times get tough. This year’s big stock market decline, the fifth worst on record through this point on the calendar for the S&P 500, might leave you unsure about whether your portfolio is truly right for you. Take heart! You are not alone if you feel a bit of anxiety about your money.

Last month, Ally Financial (NYSE:ALLY) conducted a survey with some surprising results regarding my fellow millennials and what they have been doing with their investments. According to data gathered in August, a whopping 49% of millennials claimed to have sold investments in the preceding year. Compare that to just 21% of Gen X and even lower percentages for the youngsters in Gen Z and seasoned baby boomers.

Survey Says: Millennials Selling Out

Selling Behavior among different generational groups
Selling Behavior among different generational groups

Source: Ally Invest

It’s my hope that millennials, the oldest of whom are pushing 40, were selling securities for the right reasons. What might those be? Paying for life events such as buying a first home, covering costly daycare bills, or perhaps helping out aging parents who might not have enough saved.

What would be unfortunate is seeing folks in their 20s and 30s capitulate due to market volatility, recession risks, or just seeing all that red on their investment account landing page. Also, while the pandemic was tough, splurge-spending using cash from selling what were supposed to be long-term investments is not a great strategy to reach financial freedom sooner rather than later.

The key point here is that panicking during a bear market is no way to properly manage your investments. Young investors must recognize that owning stocks for the long haul means accepting inevitable bear markets and high volatility.

As the poetic quip goes, “the tide rises, and the tide falls.” The same goes for the world of investing. There are easy-breezy bull markets and grueling bear markets. Financial writer Morgan Housel often says volatility is like a fee worth paying, not a fine worth avoiding. While it is hard to do in real-time, ignore the volatility and focus on your long-term portfolio plan.

If you’re like me, you as a millennial have potentially decades before you will tap your investments. That means not only must you endure volatility, but you can also embrace it! After all, when bear markets come about, we can buy shares on the cheap. According to Keith Lerner, buying the S&P 500 after a 20% drop from a record high has historically resulted in a solid 29% total holding period return over the ensuing three years. That means we are likely better served buying during 2022 rather than selling.

The Bottom Line

This year tests all investors’ mettle. Steep declines in the stock and bond markets with prolonged volatility make the bull market of late 2020 and 2021 seem like ages ago. Now’s the time to take advantage of attractive valuations even though more pain might take place in the near term. Sticking with a strategy of periodically buying into stocks will prove to be a smart move.

Disclosure: Mike Zaccardi does not own any of the securities mentioned in this article.

***

The current market makes it harder than ever to make the right decisions. Think about the challenges:

  • Inflation
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  • Disruptive technologies
  • Interest rate hikes

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For that, there’s InvestingPro+, with all the professional data and tools you need to make better investing decisions. Learn More »

Millennials Dumping Stocks: Why Now’s The Time To Do Just The Opposite
 

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Millennials Dumping Stocks: Why Now’s The Time To Do Just The Opposite

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Comments (31)
John Hill
John Hill Sep 26, 2022 7:05AM ET
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Another 1929 market crash coming. S&P 3000 at best. What those that "buy and hold", "dollar cost averagers" fail to see is it took TWENTY FIVE YEARS for the market to recover. Do you have that long to heal even? Sell short, hold cash and buy well funded startups after the cloud clears. Many bellwethers will go belly up. Study your history.
Joe Rizzuto
Joe Rizzuto Sep 26, 2022 7:05AM ET
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you sound like a idiot
Kevin Brown
333X2 Sep 26, 2022 6:20AM ET
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Millenial here. 1984. I sold everything on 11/16/2021 because a toddler could see what was about to happen. so if that's the wrong reason, I'm happy to be wrong.
Ricardo Diogo
Rcd72 Sep 25, 2022 10:59PM ET
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they are selling because they can't believe that fed lunatic money policy could not last much more.money can not be free! never!and all the drop until now is just shaving a Ponzi balloon
Todd Gray
Todd Gray Sep 25, 2022 10:48PM ET
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it might rise on bs. but jim rickards says the crash has begun. and, the Pentagon and CIA does not call Mike Zaccardi, CFA, CMT for advice & strategic planning.
Jeff
Jeff Sep 25, 2022 8:32PM ET
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DCA, Dollar cost averaging is your new best friend. As the market goes down, you're getting more for less. Sadly, you get little to no information on how to invest.
John Hill
John Hill Sep 25, 2022 8:32PM ET
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Dollar cost averagers do not see market history. This will be a major crash. All major crashes took years to recover. Most 10-25 years just to break even. Cash is king or sell short.
James Gomez
James Gomez Sep 25, 2022 8:09PM ET
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So don't sell, wait for the drop and buy more shares at a cheaper price with your profits from selling at a higher stock price?
Tim Barry
Tim Barry Sep 25, 2022 8:08PM ET
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This is a time to preserve capital and hedge against substantial losses.
Kris Jay
Kris Jay Sep 25, 2022 7:40PM ET
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maybe millenials sell as they havent drank the "buy and hold" or "dont time the market" cool-aid.  Fed has said they will hike interest rates and reasonable people know what happens when they do.  why hang on to your positions and watch the gains erode since there is no fed pivot in sight?
Thomas Bobbitt
Thomas Bobbitt Sep 25, 2022 7:30PM ET
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They Should have sold on the summer pop. Still a ways down to go so they will save a little. Think S&P 3000 min.
Adamo Nals
Adamo Nals Sep 25, 2022 7:14PM ET
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Wrong. Unless you’re 45 or older you won’t understand how the real world works in regards to rate hikes rates mortgages everything. Because if you’re younger than 45 you think 0% interest rates and unlimited printing of money is normal. My Lord I’m laughing. See you down another 35 to 45% in the market. This has been 15 years in the making plus. A 15 year failed federal reserve experiment with 9 trillion on the books.
Tony Ab
Tony Ab Sep 25, 2022 7:14PM ET
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Dont bank on that 35-45 % down from here :) . You def got a point although . And unfur im way older than 45
Kris Jay
Kris Jay Sep 25, 2022 7:14PM ET
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Tony Ab  yes he's overshooting it a bit but we will see SP500 at 3200 for sure without any new catastrophic event,  just the impact of Europe's energy crisis is enough to get us to 3200.
 
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